Repossession Guide

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Repossession Guide

If you have fallen into arrears with your monthly mortgage repayments, there is a real risk of repossession. Repossession occurs when a mortgage lender reclaims a house and sells it to make back the money lent.

Borrowers face having their house repossessed if they miss mortgage repayments and cannot make up arrears. In times of economic slowdown, vulnerable borrowers such as first-time buyers or sub-prime borrowers face a greater risk of repossession.

Repossession is a last resort for mortgage lenders, and the majority of mortgage arrears do not end up in repossession. The lender typically reaches an agreement with the borrower to pay off money owing.

John Stepek of MoneyWeek speaking to BBC News 24 on February 8, 2008 about the rise of repossessions in 2007 and the sell-to-rent-back market.

Usually, repossession is carried out by the Bank or Building Society that offered the mortgage loan. When the loan falls more than two months into arrears, the lender has the right to seek repossession. However, usually at this point lenders pass the borrower to their debt recovery service. This agency will liaise with the borrower and agree a plan of action with the aim of avoiding court and repossession.

Typically, six months of arrears will result in a lender issuing a court action, but this varies between lenders. At this point, a summons is issued with a hearing date about a month ahead. At the hearing the lender puts forward a claim for possession. The borrower can still demonstrate ability to pay monthly instalments, and the court will usually issue a suspended possession order.

This is known as a Repayment Order, and although the lender has possession the borrower cannot be evicted whilst he or she meets repayments and arrears.

If an Order of Possession is made, or the borrower defaults on a suspended order, the lender will apply for the bailiff to attend and evict. The lender has to issue a Possession Warrant, which often takes 2-3 weeks.

The borrower has a final recourse of appeal, for if they are selling the house the Possession warrant can be suspended.

Next: How to stop repossession